Cola Wars Continue: Coke vs. Pepsi in the 1990s (Cola Wars)

Question 1 The concentration producing industry has one buyer and through its value chain. Instead, costs for advertising, promotion, market research, and bottler relations were significant. On the other hand, bottling industry is the mid-way player in the soft drink industry. There are two suppliers and one buyer involved in its value chain (Exhibit 1). Whether two industries are profitable depends on soft drink consumption, which had increased for more than 20 years and plateaued in the 1990s. …

…new entrants to maintain bottler relations or organize small bottlers are so high that may eat up gross profit. Finally, as discount retailers such as Wal-Mart and K mart prospered during the 1990s, CPs are facing pressures on lowering their wholesale price. Besides, it seems only Pepsi and Coke were involved in Door-Store Delivery method, CPs that sell products to private label and warehouse would be facing less distributors due to negative net profit/unit.